04/ 27/ 2006
by Tamara E. Holmes
Sometimes, small businesses must take stock to see what’s working and what’s not, and in doing so, they may find that certain products or services aren't profitable. If this is the case, it’s time to make some difficult decisions about whether you should discontinue these practices, and how to tell current customers about the changes.
You don't have to automatically discontinue every unprofitable product or service. Sometimes, there is a period of time before profitability in which consumers must be educated about a product or service. Likewise, some products and services are profitable only at certain times of year. You must first determine whether the products and services in question are merely in the midst of a slump or are truly unprofitable day in and day out.
Next, you should consider whether the product or service offers some other type of value to your business. For example, an unprofitable service you offer during the holiday season might garner press coverage each year. While you might not be making money on the service, you're getting free publicity and possibly luring more customers to your business.
The final thing you should do before discontinuing a product or service is consider whether there is anything you can do to change things around. Have you been marketing the product or service effectively? Is the pricing competitive? Make sure that discontinuing a product or service means that you're not throwing away an opportunity.
If you've thought about it and have decided that continuing a product or service isn't worth it, you must come up with a way to break it to customers. Unless the product or service was a complete failure, some of your clients or customers found value in it.
In some cases––particularly when it comes to services––it might make sense to continue to offer the service to current clients, but to phase it out to others. That way, those who are already loyal to you will still be happy.
Unfortunately, that’s not always possible. If you have to break the news to customers that you'll be discontinuing a product or service they use, here are ways to do it gently:
- Point customers to similar products/services. If there is another product or service you offer similar to the one you're discontinuing, let the customer know. They might find that the new product or service works just as well for them.
- Don't stop abruptly. If you have regular clients or customers that depend on the product or service, give them time to prepare for the change. That way they can find an alternative.
- Offer an explanation. Most people don't like sudden change, and customers who depend on you for a product or service won't appreciate having to go elsewhere for it. By explaining that the product or service is unprofitable for you, you'll be letting the customer know that you're not just discontinuing it on a whim, and you're as sorry as they are to see the product or service go.
- Help them find the product or service elsewhere. Since you're no longer going to be offering the product or service, you may want to let loyal customers know where they can get it. While you're technically steering them away from your business, they'll appreciate the service and think highly of you. When they need other products or services that you offer, they'll be likely to remember you then or even recommend you to others.
In the course of business, every product or service won't be profitable. With careful thought and planning, you can downsize products and services without downsizing your customer base.
